By Daily Crux Editor Sean Goldsmith:
If this data from Bloomberg is any indication, you can make a quick profit buying GM when its shares start trading again (the NYSE suspended trading before market open today)...
Stocks of the 20 largest U.S. companies that declared bankruptcy since 1980 rose an average 18 percent one week after filing for court protection from creditors, according to data compiled by Bloomberg and BankruptcyData.com, a Boston-based research firm. The increase diminished to 3.1 percent over a month and turned into a 15 percent loss within three months as the shares began to be removed from exchanges, the data show.
The rally in the stock has nothing to do with bullish sentiment - it's just from short sellers covering their positions... "Companies spiraling downward toward bankruptcy are often sold short as people realize the dire straits they are in," said John Carey, a fund manager at Pioneer Investment Management. "The likelihood is the stock will become worthless and people want to cover their shorts."
Read full article...
More on GM and other distressed companies:
GM bankruptcy to cost $40-$70 BILLION
The one group profiting from Lehman's collapse
Chrysler bankruptcy "all but certain," 194,000 jobs at risk
